Analysis of Zero-hour Contracts

Introduction

This paper engages in an examination and analysis of zero-hour contracts with particular regard to their legality and morality. Zero-hour contracts have attracted significant media attention in recent times with particular regard to their merits and demerits (Pennycook et al., 2013). Whilst advocates of zero-hour contracts state that they reduce unemployment and provide flexibility to both workers and employers, their critics state that they are open to abuse and their misuse can lead to worker exploitation (Pennycook et al., 2013). This paper first takes up the issue of their legality and thereafter delves into the ethical and moral issues that are associated with their use.

Discussion and Analysis

Legality of Zero-Hour Contracts

A zero-hour contract (a term that is primarily used in the UK) is a form of contract, involving an employer and a worker (Xu, 2018). The employer in such a contract is not obliged to provide any sort of minimum working hours to a worker, whereas a worker is not under any obligation to accept any sort of work that is offered to him (Xu, 2018). The employee, in a zero-hour contract can enter into a agreement with the employer to be available for work when necessary; the agreement in such case does not specify the specific number of hours or time of work (Brinkley, 2013). Research reveals that around 3% of the UK workforce work on zero-hour contracts (Xu, 2018). The Office for National Statistics (2015) stated that an estimated 1.4 million jobs are offered on such terms.

The National Minimum Wage Act 1998 in the UK states that workers employed under zero-hour contracts must be remunerated in accordance with the national minimum wage for hours worked (Collins, 2010). New regulations about zero-hour contract were introduced in 2015 (Xu, 2018). The law stops employers from enforcement of exclusivity clauses in a zero-hours contract and states that it is unlawful for a worker to suffer a detriment because he or she works for another employer (Xu, 2018). Zero-hour workers have the same employment rights as regular workers, even though they may have breaks in their contracts from time to time, which can affect rights that accrue over time (CIPD, 2013). Zero-hour workers are entitled to annual leave, the national minimum wage and national living wage and pay for work related travel just like regular workers (CIPD, 2013).

With regard to legality and employment status it is seen that employers recruit workers under zero-hour contracts (The Work Foundation, 2013). The development of the relationship between the employer and the worker can enhance the status of the employment to that of an employee with additional employment rights, like for example statutory notice rights (The Work Foundation, 2013). It should also be considered that the zero-hour status has to stand up on paper, as well as practice (The Work Foundation, 2013). In case of disputes, an employment tribunal may decide for themselves on the contractual relationship that exists between an employer and a worker and associated employment rights (Whitehead & Phippen, 2015). It can be thus concluded that a zero-hours contract is a non-legal term used for the description of different types of casual agreements between an employer and individual (Whitehead & Phippen, 2015). All people employed on zero-hours contract are entitled to statutory employment rights, at least the national minimum wage, paid annual leave, rest breaks and protection from discrimination (Whitehead & Phippen, 2015). It would thus be inappropriate to term them illegal.

Driving Forces of Zero-Hour Contracts

The use of zero-hour contracts in the UK has been growing in recent years, driven primarily by the benefits for employers (Adams & Deakin, 2014). They have been found to be useful when work demands are irregular or where the demand for staff is not constant (Adams & Deakin, 2014). Some types of work are also driven by external factors that are beyond the control of the employer, especially in the hospitality, leisure and catering sectors (Adams & Deakin, 2014). Owners of new businesses may need to develop customer base and thus find it suitable to employ people on zero-hours contracts in addition to permanent employees to manage unpredictable and fluctuating demands (CIPD, 2015). Zero-hour contracts are also helpful to meet demands like seasonal work pressure, unexpected staff sickness, special events and the testing of a new service (CIPD, 2015).

It is also important to note that whilst zero-hour contracts provide substantial flexibility to employers, they are also suitable for individuals, especially students who require flexibility in their workspace and cannot afford to be tied down to their work (Adams et al., 2015). Such people can tailor their working, accepting greater or lesser work in accordance with their work demands (Adams et al., 2015).

Ethicality and Morality of Zero-Hour Contracts

Much of the negativity surrounding zero-hour contracts stems from the fact that such employment is unstable and is open to abuse and exploitation (Whitehead & Phippen, 2015). Zero-hour contracts do not provide any type of financial stability to those who are employed under them (Whitehead & Phippen, 2015). They do not provide any guarantee of work and can thus be risky, especially for people who have young children or teenagers (Whitehead & Phippen, 2015). Recent reports indicate that the use of these contracts has increased substantially in the last few years and unscrupulous organisations have begun misusing the flexibility provided by them to exploit vulnerable staff and evade their responsibilities (Xu, 2018). Employees have little choice, but to accept these contracts in difficult economic times (Xu, 2018).

Critics of zero-hour contracts have stated that employees are required to become available for work at short notice, which prevents them from searching for or taking on other work opportunities (Chapman, 2017). The failure to accept work when it is offered may result in a contract being terminated or lesser work being offered in future (Chapman, 2017). The unpredictable and irregular nature of work makes it extremely difficult to take care of children and other dependents (Chapman, 2017). Variations in pay packets also make paying of regular bills and the claiming of work benefits difficult (Adams & Deakin, 2014). It should also be noted that provisions for pensions, sick pay, holidays and other entitlements are minimal (Adams & Deakin, 2014). CIPD (2015) stated that whilst zero-hour contracts commercially appear to be attractive to employers and enable them to work flexibly in dynamic market environments, they can result in reduction of employee morale, lack of loyalty and high staff turnover. Studies have revealed that employees are hugely disadvantaged because of lack of job security, irregularity of income, lack of full employment rights, difficult hours and problems with child care (The Work Foundation, 2013).

With regard to ethicality and morality, it is important to look at the issue from different perspectives (CIPD, 2013). Such contracts provide employers with significantly higher flexibility and thus encourage them to provide employment to individuals without the risk of permanent employment, employer-employee disputes and costly litigation (CIPD, 2013). These in turn help in enhancement of national employment and media reports do confirm that the use of zero-hour contracts has resulted in the containment and even reduction of unemployment in the UK (Adams et al., 2015). It must however also be recognised that these contracts favour the employer, create an uneven and unfair playing field and lead to numerous possibilities for exploitation of workers, with specific regard to regularity of work and salary, as well as important employment benefits (Adams et al., 2015). Employers who misuse the flexibility provided to them clearly engage in immoral and unethical acts and should be prevented from doing so through legal and regulatory action (Adams et al., 2015).

Employers should thus apply specific best practice principles in their use of zero-hour contracts. Such contracts should be transparent and clear in order to ensure that employees can understand their rights and realise their contractual obligations (Brinkley, 2013). Employers should plan ahead and provide as much notice as possible when providing work (Brinkley, 2013). They should refrain from cancelling work at late notice until and unless it is truly unavoidable (Brinkley, 2013). They should furthermore comply with all aspects of law, including employment law (Pennycook et al., 2013). The adoption of such practice is not difficult but can certainly help in improving the conditions of workers who take up such contracts and increase the fairness of their working environment (Pennycook et al., 2013).

Conclusions

This paper engaged in the examination of zero-hour contracts, with particular regard to their legality and morality in order to conclude whether their use should be stopped in the UK. The examination revealed that zero-hour contracts are essentially employment contracts that cover a wide range of casual work and do not provide workers with firm and committed employment hours. Such contracts are being increasingly used in recent times and it is estimated that approximately 3% of the UK workforce, i.e. more than 1 million individuals currently work on such contracts (Xu, 2018). The examination revealed that workers under zero-hour contracts do have specific legal rights, even though they are limited in nature and it would thus be inappropriate to term such contracts illegal (CIPD, 2013).

The issue of morality is however more complex and there is little doubt that such contracts are biased highly in favour of the employer (Brinkley, 2013). Unscrupulous businesses can thus make use of the contractual flexibility provided by zero hour contracts to exploit their workers (Brinkley, 2013). It is thus necessary to ensure the institutionalisation of specific regulatory processes that prevent misuse of zero-hour contracts by unscrupulous business organisations (CIPD, 2015). This will result in greater fairness for workers, as well as provide operational and business benefits for employers (Xu, 2018).

Office of National Statics, (2015), “Analysis of Employee Contracts that do not Guarantee a Minimum Number of Hours”, Available at: http://webarchive.nationalarchives.gov.uk/20160106105138/http://www.ons.gov.uk/ons/dcp171776_396885.pdf (accessed June 20, 2018).

Whitehead, O., & Phippen, A., (2015), “An investigation into the ideas and effects of zero-hour contracts within the United Kingdom”, Journal of Research Studies in Business & Management, Vol. 1: pp. 189-202.